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October 31, 2012

Wealthy Donors Committed and Engaged: BofA Study

Last year, richest 3% gave half of all individual donations

Last year, individual Americans gave more than 70% of the nearly $300 billion donated to charity, and about half that amount came from the wealthiest 3% of households, according a new study.

The study, the fourth in a biennial series conducted in conjunction with the Center on Philanthropy at Indiana University, showed that 95% of high-net-worth households donated to at least one charity, compared with 65% of all U.S. households that donated to charity.

In addition, 89% of wealthy individuals volunteered their time and talent to nonprofits in 2011, up 10 percentage points from 2009.

The study for the first time asked wealthy donors to forecast their giving in coming years. Seventy-six percent said they planned to give as much as or more three to five years hence than they had in the past; only 9% said they would give less.

The 2012 study revealed both major shifts and consistent trends in the attitudes and giving priorities of wealthy donors.

Engagement boosts giving

Last year, the study found, 54% of wealthy individuals volunteered more than 100 hours, and 35% volunteered more than 200 hours. Generally speaking, the more they volunteered the more they gave.

The most common volunteer activity in 2011 was serving on a nonprofit’s board of directors (61%), followed by event planning and fundraising activities (both 48%). Meanwhile, 40% provided professional services to the nonprofits they supported.

The study found that wealthy individuals were increasingly contributing to organizations where they both volunteered and believed their gift would have the largest effect. In instances where both were true, the average gift to these organizations grew by 40% between 2009 and 2011.

Strategic giving

The majority of wealthy donors’ charitable giving was guided by a specific strategy, according to the study. Eighty-one percent of donors in the study gave to a targeted set of organizations based on geography or a specific cause or issue, compared with 16% who gave with no particular focus to a large number of organizations.

Charitable provisions in a will continued to be the most common giving vehicle (43%), but the use of other vehicles was on the rise. Twenty-six percent of respondents reported having a private foundation or donor-advised fund, and another 5% planned to establish one during the next few years.

Forty percent of wealthy donors consulted with an outside advisor about their charitable giving last year, most often their accountant (53%), followed by their financial or wealth advisors (37%) and nonprofit personnel (33%).

The lucky nonprofit sectors

In 2011, 80% of high-net-worth households gave to educational and 79% to basic needs organizations. These were followed by arts (69%), health (65%) and religious (65%) organizations.

Consistent with 2009 findings, the areas that received the largest proportion of gift dollars last year were education (28%), giving vehicles (23%) and religious organizations (13%).

The average dollar amount given per high-net-worth household declined by 7% between 2009 and 2011, from $56,621 to $52,770 (adjusted for inflation).

Last year, wealthy households tended to direct their biggest gift to religious (36%), education (25%) and health (8%) organizations. They cited as their objectives for their largest gifts a nonprofit’s general operations (61%), to fund a particular program or activity (30%) and to support organizational expansion and innovation (21%).

Feeling motivated

Nonprofits are always interested in what motivates wealthy donors to give. Similar to the last study, this year's study found that wealthy donors gave under the following circumstances:

Being moved by how a gift can make a difference (74%)

Feeling financially secure (71%)

Because they give to the same organization or cause annually (69%)

Because they feel the organization they are supporting is efficient (68%).

Only 32% said receiving a tax advantage was a chief motivator for giving. Half reported they would maintain their current charitable giving levels even if income tax deductions for donations were eliminated, and 95% would maintain or increase their bequest giving even if tax deductions for estate giving were permanently eliminated.

Seventy-eight percent of donors reported a sense of fulfillment through philanthropic giving or volunteering, and 75% cited satisfaction from the effect their charitable activities had on the people and world around them. Only 18% felt a need for visibility or recognition based on these activities.

My way or the highway

Eighty-two percent of survey participants expected their nonprofit donees to spend an appropriate amount of their donation on general administration and fundraising, and 76% looked for demonstrations of sound business and operational practices.

Three-quarters also expected nonprofits to honor their request for privacy and anonymity and not to distribute their name to others.

In 2011, 30% of wealthy donors stopped giving to at least one nonprofit organization they had previously supported; 27% stopped giving to one organization and 32% stopped giving to two.

Donors stopped giving to a particular charity for several reasons:

The donor received too frequent solicitation or the nonprofit organization asked for inappropriate amount (38%)

The nonprofit organization they supported changed leadership or activities (29%)

The donor personally changed philanthropic focus or decided to support other causes (27%)

The donor was no longer personally involved with the organization (12%)

Confidence in nonprofits’ influence

Among the leading societal and public policy issues that mattered most to wealthy donors in the survey were education (60%) and health care (45%), followed by the economy (38%), poverty (34%) and the federal deficit (33%).

The study asked high-net-worth households about their confidence in various societal groups and institutions to solve domestic and global problems. The vast majority affirmed their faith in nonprofits and individuals to influence and enact positive change.

Fewer had confidence in the private sector, and far fewer had faith in various areas of government.

In the lead-up to the election, 51% of wealthy households said they had given to political causes in 2011 for the purpose of electing or defeating a candidate. By comparison, about 13% of the general population made political contributions.

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